We recently compiled a list of the 10 Best New Penny Stocks To Buy Now. In this article, we are going to take a look at where Acelyrin, Inc. (NASDAQ:SLRN) stands against the other new penny stocks.

Fears of a US recession are growing, sending stock markets down, and investors around the world are on edge. The US Bureau of Labor Statistics (BLS) released July job figures that were worse than anticipated, revealing only 114,000 new jobs generated in July compared to the predicted 175,000. These data alarmed investors, as did the disappointing latest earnings from tech giants. As a result, the manufacturing industry in the US had an eight-month low in activity and the unemployment rate reached a three-year high of 4.3% due to a decline in new contracts.

Monday was the worst day for Wall Street in nearly two years as key indexes fell on worries about a US recession. The average of the 500 largest publicly traded companies plummeted 3% to 5,186.33. However, the 500 large companies are still up more than 10% for the year.

Chris Weston, of the US online stockbroker Pepperstone, said global markets were “at a truly important juncture”. “What really matters now is whether money managers and traders feel sentiment has become too pessimistic, or if this deleveraging and risk aversion manifests into even higher volatility and drawdown.

Opinions among analysts regarding the gravity of the problem differ. James St Aubin, chief investment officer at Ocean Park Asset Management, “We’re witnessing the fallout from the curse of high expectations,”, while Art Hogan, chief market strategist at B. Riley Wealth, said that markets may be overreacting. He stated:

“This isn’t a Category 3 hurricane, but we are seeing how markets react to signs that the economy is normalising after turning hot in the first half of this year.” “Markets can find themselves overreacting and investors [latch] on to anything as an excuse to take profits.”

The 500 large companies have gained more than 15% this year, despite recent setbacks.

The market’s anxiety may be heightened by the possibility that fewer initial public offerings (IPOs) might take place this year. However, 154 IPOs were listed on the US stock market in 2023, but this was 85% fewer than the record-breaking 1,035 IPOs in 2021 and 15% fewer than the 181 IPOs in 2022, 82.5% fewer than in 2021. IPOs totaling 6,203 have occurred between 2000 and 2024. 2009 had the fewest, with just 62. With 1035 IPOs in total, 2021 established an all-time record, surpassing the previous high of 480 in 2020.

George Chan, EY Global IPO Leader, says:

“As 2024 unfolds, participants in the IPO market are entering uncharted territory. IPO candidates are influenced by the recent pivot in investors’ preference toward proven profitability in an altered interest rate landscape, and are doing this while facing the intricate dynamics of an intensified geopolitical climate and the buzz around AI. To succeed in this shifting environment, IPO prospects must remain flexible and prepared to seize the right moment for their public debuts.”

Recent data from EY Global IPO Trends Q2 2024 show that in 2024, the US IPO markets saw a strong start that increased global proceeds. On the other hand, the Asia-Pacific area had a poor start, which affected the worldwide volume overall. In the first half of 2024, the industrials (21%), technology (19%), and materials (11%) markets led the way in global IPO issuance, with India dominating in terms of deal volume. Meanwhile, the technology (21%), health and life sciences (17%), and industrials (15%) markets topped the IPO proceeds rankings, with the US attracting the lion’s share of these sectors. As the home to many of the world’s leading technology and healthcare companies, the US has a strong ecosystem for startups. Driven by favorable market conditions, expectation of interest rate cuts, and innovations in artificial intelligence (AI), IPO deal values have skyrocketed in both these markets. Moreover, a handful of large deals contributed to a 67% increase in proceeds from IPOs in the US in the first half of 2024.

Methodology:

In this article, we first used a stock screener to list down all stocks trading under $5 (as of the writing of this article) with high institutional ownership. We have limited our selection to stocks that went IPO over the past year. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks. We have used the stocks’ market cap as a tie-breaker in case two or more stocks have the same number of hedge funds invested.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)

Acelyrin, Inc. (NASDAQ:SLRN)

Number of Hedge Fund Investors: 24      

The American biopharmaceutical company Acelyrin, Inc. (NASDAQ:SLRN) is committed to creating and marketing advanced medicines for autoimmune diseases. Its main candidate, izokibep, is an interleukin-17A inhibitor that targets hidradenitis suppurativa (HS) and psoriatic arthritis (PsA). It is a monoclonal antibody used to treat hidradenitis suppurativa, a chronic inflammatory skin condition.

Months after a $540 million IPO, Acelyrin’s izokibep phase 3 clinical study failed, triggering an 81% decline in the company’s stock price in September 2023 to date. However, recent trial findings show growth after prior setbacks.

SRLN is one of the best new penny stocks to buy now. The date of the IPO for SRLN is May 5, 2023. As of Q1 2024, the firm’s investors included 24 of the 920 hedge funds surveyed by Insider Monkey, in line with the prior quarter.

Acelyrin has a strong financial standing. The firm completed Q1 2024 with $678.5 million in cash and equivalents, 134.63% cash growth from the same quarter last year, which is projected to finance operations through 2026. Acelyrin, Inc. (NASDAQ:SLRN) reported -$0.36 EPS in the first quarter of fiscal year 2024, beating the consensus expectation of -$0.93.

In a recent Phase 2/3 study in PsA, Izokibep had substantial statistical significance in meeting the main objective of ACR50 at week 16. This is noteworthy considering the increased baseline disease burden compared to previous studies since the 160 mg weekly and bi-weekly dosages demonstrated superior responses in higher hurdle endpoints such as ACR70 and PASI100. Even though early trial execution mistakes were present, long-term data in HS also indicates a possible route to market.

Acelyrin’s strategy, which is supported by the performance of comparable IL-17 inhibitors like Cosentyx, is intended to set izokibep apart in the highly competitive PsA market. Effective strategies, such as emphasizing enhanced safety and effectiveness characteristics, are crucial for breaking into new markets. Following a 10% increase on PsA news, the enterprise value turned positive, suggesting room for expansion.

The company’s second Phase 3 study for the treatment of izokibep HS has completed enrollment of 258 patients, and topline findings have been moved up to 3Q24 due to faster-than-expected enrollment. Lonigutamab’s Ph1/2 update could be beneficial since it will provide further information on the dose for a future thyroid eye disease trial. An early assessment of SLRN-517 is in progress. Moreover, the company has nominated Mina Kim, who served as its chief legal and administrative officer, to the board of directors and to assume the role of CEO.

However, risks include clinical program effectiveness falling below expectations and safety alerts arising with any of the company’s preclinical or clinical projects.

Nonetheless, analysts are bullish on the stock and rate it as a  “buy” with an average target price of $12.8 and a potential upside of 148.30%.

In conclusion, Acelyrin, Inc. (NASDAQ:SLRN) has upside growth potential because of its recent favorable trial findings and strong financial position.

Overall SLRN ranks 1st on our list of the best new penny stocks to buy. While we acknowledge the potential of SLRN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SLRN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.